Note: Go and get yourself that cup of coffee before you start reading. This is a long post. I tried to shorten it, and I tried to cut it into pieces, but I wasn’t happy with the results. I want you to read this in one sitting so you get the message of optimism I’ve written here for you, especially if you are concerned about the economy and your current financial situation.
You don’t have to be paying close attention these days to understand that the economy is tough and many people are experiencing rough times.
The Dot-Com Boom
All of this reminds me of the world during the dot-com bust. Do you remember the days when the AOL juggernaut seems unstoppable, when WebTV was hot, and Bluetooth specifications were newly formalized? I was 15 years into my career and was being courted by Silicon Valley companies who had exhausted their geographic resources for experienced software user assistance, user experience, and technical writing professionals. They were heady times for anyone in technology. Phoenix was a hotbed of startups, venture capital overflowed it’s cup, and a lot of really bright people were chasing brilliant ideas.
I had a dream of becoming a technology journalist back then. I wanted to write for Red Herring, the magazine home of my writing idol, Rafe Needleman. I paid attention to the technology news, read 50 or more press releases a day, and sponged in as much industry information as I could hold. I wrote profiles of US companies expanding into Europe, and interviewed their senior executives. I was chasing my own dot-com dream.
The Boom Turned Bust
I remember the day when I read in separate articles that Amazon and Google and many others were going to run out of venture capital in 2000 and still were not generating enough revenue to survive. Being self-employed myself for five years at that point, I felt a sense of panic. These were the poster child companies of the dot-com era, and they were not yet profitable. I realized that we were on dangerous ground, that people were doing things just because they could and not because it made business sense. It was a time of technology for technology’s sake. I felt a foreboding of tough times ahead. Soon, I started reading articles with warnings about the dangers of tossing out business sense. Sure, the old business models didn’t work in the dot-com economy, but basic economics still drives the economy. I wondered what I would do, how my company would survive, and if I needed to find a job somewhere to ride out the approaching storm.
There were several rough years, and Phoenix took it harder than other places because of the entrepreneurial spirit of the city. The dot-com bust people swallowed up the available jobs, and the job market shrank. We went from having more than 50 technical recruitment companies to just a handful, and they were all lean and hungry and run with a skeleton staff. Many of my clients went out of business, and the ones that survived had layoffs. Companies like American Express, which had been driven by a contractor workforce, stopped using contractors. At one point, I realized that I was starting over because nearly everyone I had done business with was no longer in the technology industry. It was a strange, challenging time, almost like a nuclear winter for the business environment.
Surviving The Bust
Happily, I survived these times with my company intact. I started doing work for the State of Arizona, and found clients in niches who were growing. I made changes to my personal life that allowed me to thrive with less. My mantra became “how can I improve my quality of living and spend less?” It was a time for the realignment of thought and practice. I changed many things about my life, my expectations, and my business. It wasn’t always fun, but it was practical and necessary, and it allowed me to continue to chase my dream of self-employment.
In the years that followed, as the economy grew and the technology industry rose from its ashes, I embraced the enthusiasm of the time, but now with a wizened outlook. I had been through hard times, and they changed me. I didn’t carry forward a sense of fear, but I found myself thinking through my plan B or my exit strategy as much as my primary business plans. I was cautiously optimistic now.
Now that tough times are back, I am getting a chance to compare my situation today to my situation back then. What did I really learn from that time? Am I prepared for a downturn, and how long can I survive without pain? Even with the bad news about the economy, I’m not worried at all. I’m confident, I’m hopeful, and I’m at peace with the things going on.
So what did I really learn from the dot-com bust, and what can I share with you as you face this rough time? Here’s my summary lessons.
Lesson 1: Technology Serves Business
Technology is a wonderful thing, but it has little intrinsic value. It’s real value lies in its use to facilitate other goals. Business goals. Health and wellness goals. You get the idea. It’s fun for the industry to have some time to brainstorm, to experiment, and envision new tools. But in the end, even the most brilliant technology won’t be adopted unless it supports a business goal.
When technological innovation runs amuck like it did in the dot-com boom, the business people don’t understand how to utilize these new tools and platforms to solve existing business problems. The greatest number of people benefit when technology finds a solution to a business problem. An elegant technology solution can revolutionize business, even in a small way (think 1-click ordering without the patent wars).
In my personal and business life, I apply this lesson in practical ways. I don’t upgrade software or equipment just because there are newer, flashier, or nicer things on the market. A software upgrade must be justified by increased relevant features, and new equipment generally only replaces non-working equipment. I do upgrade with each version of Microsoft Office because it is critical to my daily business operations. All other major software gets upgraded every other new version. And with some tools, like WinZip, I continue to use old versions until there is an operating system incompatibility. I used my first digital camera for 8 years and only replaced it when it broke. This is how I managed to live until last month without an iPod or another MP3 player.
Lesson 2: Tough Times Reveal What Is Essential
It’s very easy to roll along when things are good, constantly adding to our lives and never really taking the time to cull out the weeds or the undergrowth. When times get tough, you start to rethink even your routine expenses to find ways to cut back. For example, you may ask yourself if you really need both the Netflix subscription and the full line of movie channels on your cable/satellite system. You might consider packing a lunch several days a week instead of eating out every day, or you may decide to start a homemade pizza tradition one night a week instead of ordering out or picking up fast food.
By asking yourself these questions, you get to the heart of your values. You prioritize your spending on the things that provide the greatest value and pleasure in your life, and plug the holes in your wallet on other things. Sometimes, these changes are temporary and you add things back when times improve. Or, you may discover that your family pizza night provides you with benefits you couldn’t imagine when you were simply thinking about how to stretch the smaller food budget a bit further.
Lesson 3: A Little Contraction Builds A Stable Foundation
It seems to be part of the human condition to always want the next thing, and to dream about where we can go from where we stand today. That’s not a bad thing. In fact, it seems to be what drives human progress through the ages.
But everything goes in cycles. At times, the economy inhales and expands. You feel like the sky is the limit. You even get away with some reckless abandon in your life and lifestyle. Then, in due time, the economy contracts and exhales, and you feel the pinch. If you took risks or made some decisions that weren’t exactly smart, you can get caught on a slippery slope of your own making. Some lessons get learned the hard way.
One advantage of going through a hard time is that you learn how to protect yourself in the future. I’m not suggesting that anyone can be fully prepared for all that life can throw your direction. But there are some things that you can do that minimize the effects of hard times, things that give you additional time before the real pain sets in. For example, I learned how important it is to have enough in savings to pay my bills for as long as eight months. It’s not enough money to survive every possible situation I might face, but it certainly gets me through unexpected client project delays and canceled projects without breaking a sweat.
Lesson 4: Hard Times Are Life’s Pop Quizzes
No matter how well you think you are doing, you don’t know for sure until you get tested. Life has a way of throwing things at you that give you a chance to assess your decision making patterns. Given today’s reality, how did you do over the last few years? And knowing what you know today, how can you do better through the next cycle?
At a philosophical level, the way we think about our situation creates our reality. The outward facts of our lives are important, but perhaps even more important is how you think about your life and your situation. In the last tough times, I learned some practical lessons the hard way. As the economy slowly improved, I had no trouble pinching and sacrificing to build my savings account because I understood from my own experience how important it was. It didn’t seem like a sacrifice, it seemed more like an investment in myself and my future.
Now that tough times have rolled around again, I not only have the peace of mind that comes from having savings, I have a sense of pride because I clearly see how I made a pattern of smart decisions in the expansion. I learned my lessons well. Sure, there is some fine tuning I need to do, and I see some additional changes I will make going forward. But I’m in a good spot, and I’m proud that I am in a good spot. It wasn’t luck–it was my own wisdom and hard work that got me here. That feels pretty amazing.
Lesson 5: I Am Not A Statistic (And Neither Are You)
One of the most helpful lessons I’ve learned is that statistics only apply to a group of people, and not to an individual. What happens to most people doesn’t have to happen to me. In fact, when times are tough, when a large percentage of people are unemployed, and I can be in a place where I’m turning away work and making more money than when times were good. Statistics take the accurate details about a very large group of people and blend them together to make a sort of fruit smoothie. The statistics don’t reflect any one individual’s life. It’s a blended view that includes people in such diverse situations that I would not consider them my peers.
Now that I’ve seen that in my own life, it helps me to avoid drinking the statistical Kool-Aid. When things are tough in general, I think it is smart to let that trigger my self-assessment of where I might be vulnerable. But I don’t go into a panic or worry about the “what ifs?” that face the economy. I don’t assume that if something is statistically true that it will happen to me, or even touch my life in any way.
What’s Next For You?
What if this is your first time through a down cycle? Or, what if you find that this pop quiz is showing you that you need more than fine tuning going forward? Or, what if you landed in a tough spot in spite of your best intentions and efforts to make smart decisions?
- Forget about blame. It doesn’t matter how you got here. It only matters what you learn and how you get yourself out of this spot. Now that you understand what can happen, what can you do to make yourself as bullet proof as possible in the future, to not only fix the damage but to protect yourself from landing in the same place again?
- Use the pain of the moment to get really clear about what you want going forward. Hold on to that vision. It may take some time, but you will be able to do something about it. Be patient, but be persistent.
- You can change anything about yourself and your life. Anything. Believe in yourself, have hope in the future. You can do whatever you set your mind to do.
- Find a friend (or two) who sees your potential, who understands your unique brilliance, and believes in you. There’s nothing like having a friend to encourage you when the road is dreary.
- You are not alone in your struggle to figure out your life. No matter how it looks, we are all on this path of life together. We are all in the same boat. Take comfort in that. What someone else has accomplished, you can accomplish.
Bottom line: You can take what you learn from this economy and make your entire life better. Isn’t that something to celebrate?